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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File
March 31, 2001 No. 0-1709
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RVM INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 31-1515410
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
753 W. Waterloo Road, Akron, Ohio 44314-1519
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 753-4545
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (par value $.01 per share)
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[X]
The aggregate market value of the voting stock held by non-affiliates as of June
1, 2001, based on a bid price of $4.50 was approximately $779,913. The
Registrant has no non-voting common equity.
There were 1,937,505 shares outstanding of the Registrant's common stock as of
June 1, 2001.
Documents Incorporated by Reference
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None
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RVM INDUSTRIES, INC.
Index to Annual Report on Form 10-K
for the Fiscal Year Ended March 31, 2001
PART I Pages
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Item 1 Business 3-8
Item 2 Properties 8-9
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote of Security Holders 9
PART II
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Item 5 Market for Registrant's Common Equity and
Related Stockholder Matters 10
Item 6 Selected Financial Data 11
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-16
Item 7a Quantitative and Qualitative Disclosures about Market Risk 17
Item 8 Financial Statements and Supplementary Data 17-42
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 43
PART III
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Item 10 Directors and Executive Officers of the Registrant 43-44
Item 11 Executive Compensation 45-47
Item 12 Security Ownership of Certain Beneficial Owners
and Management 47
Item 13 Certain Relationships and Related Transactions 48
PART IV
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Item 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 49-51
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PART I
ITEM 1. BUSINESS
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Companies
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RVM Industries, Inc. (RVM) is a publicly held holding company. Ravens,
Inc. (Ravens), Albex Aluminum, Inc. (Albex), and Signs and Blanks, Inc. (SABI)
are wholly owned subsidiaries of RVM. The "Company" refers to RVM, Ravens, Albex
and SABI, collectively. See Note 18 to the consolidated financial statements for
financial information about industry segments.
Fiscal Year
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RVM's fiscal year ends on March 31. References to 2001, 2000, etc. are
for the fiscal years ended March 31, 2001, 2000, etc., respectively.
General Development of the Business
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Ravens Metal Products, Inc. was incorporated in the State of West
Virginia on April 9, 1956 and reincorporated in the State of Delaware on
September 3, 1986. Jacob Pollock (Pollock) acquired majority control on May 3,
1991.
On March 31, 1997, Ravens Metal Products, Inc. changed its name to
Ravens, Inc. and effected a reorganization with RVM pursuant to Section 251(g)
of the Delaware General Corporation Law. Each holder of the common stock of
Ravens became the holder of an equal number of shares of RVM, a newly created
holding company. The holders of RVM common stock have substantially the same
rights that they had as holders of the common stock of Ravens. RVM filed Form
8-B on March 31, 1997 to register the common stock shares of RVM with the
Securities and Exchange Commission.
On March 31, 1997, RVM purchased all of the common stock of Albex and
SABI which were corporations wholly owned by Pollock, the majority shareholder
of RVM. Since this was a business combination of entities under common control,
the financial statements of prior years were restated to reflect the combination
on an "as if pooling of interests" basis.
Albex was incorporated in the State of Ohio on February 25 1991, as
Wirt Metal Products, Inc., relocated its operations from Elizabeth, West
Virginia to Canton, Ohio in 1996, and changed its name in 1997 to better reflect
its business of manufacturing aluminum billets and extrusions. Albex purchased
the real estate and an extrusion press in Elizabeth from Ravens prior to Pollock
purchasing a majority interest in Ravens.
SABI was founded by Pollock and incorporated in the State of Ohio on
July 10, 1989.
On April 8, 1999, RVM purchased the assets and inventory of a steel
trailer manufacturing plant in Knox, Indiana, for approximately $1.2 million.
The plant produces a new steel trailer product line that enhances the current
product line and is sold through the Ravens distribution network.
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Markets
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Ravens
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The principal business of Ravens is the design and manufacture of truck
trailers, consisting of platform (flatbed) trailers, drop deck trailers, dump
trailers, and dump truck bodies. Since the late 1950s, Ravens has designed and
manufactured durable, lightweight aluminum trailers and bodies which provide the
advantage of lower operating costs plus higher legal payload capacity. Ravens'
products are primarily made with aluminum bodies and aluminum chassis. With the
addition of the Knox facility, Ravens now produces a dump trailer made of steel.
The steel dump trailer serves the demolition market which requires a more
durable body. Ravens' truck trailers are basically standardized products with a
number of optional features available; however, certain variations are often
made to satisfy customers' requirements. Ravens also manufactures truck and
trailer accessories, including tool boxes, side kits and boxes, bulkheads and
other optional equipment. Ravens sells a wide variety of after-market parts for
trucks and trailers, including parts for its own trailers
The markets for Ravens' truck trailer and body product lines are
virtually all within the highway transportation industry in the U.S. with a
small amount of sales in Canada. These markets include both for-hire carriers
(commercial trucking companies and owner operators) and private carriers
(manufacturers and producers delivering their own products or commodities). Dump
trailer and body applications include construction and road building materials,
agricultural and mining products, industrial and municipal waste, and a wide
range of other bulk commodities. Platform trailers are utilized in a variety of
applications, including steel and other metals, lumber, building materials,
machinery, appliances, and industrial equipment. The overall business of Ravens
is not generally seasonal.
A down turn in the U.S. trailer industry started approximately in the
second calendar quarter of 2000 and the industry has yet to see a recovery. For
the calendar year 2000 the Bureau of the Census reported overall manufacturers
shipments of units were 240,256 down 20.1% from the previous year, with the
fourth quarter shipments down 31.4% from the previous fourth quarter. Industry
analysts estimates for the calendar year 2001 manufacturers shipments to range
between 170,000 to 185,000 units.
Trailer sales have been affected by fuel prices, interest rates,
bankruptcies that have made available newer used equipment in the market place,
tighten credit policies of financing sources for customers and the overall
general slowing of the economy.
Albex
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Albex operates three extrusion presses (1,400 ton, 2,200 ton, and 3,000
ton) for standard and custom soft alloy aluminum extruded shapes. Several of
aluminum's physical properties such as tensile strength, corrosion resistance,
thermal conductivity, lighter weight than steel, and scrap value for recycling
are attractive to a wide range of markets. Albex sells to manufacturers,
fabricators and distributors in the transportation, building and construction,
consumer durables, and other aluminum extrusion markets. Most sales are to
customers in the Midwestern portion of the U.S. Albex's business is not
generally seasonal. In 2001 Albex shipped approximately 18.5 million pounds of
aluminum extrusions on a market that exceeded 3.5 billion pounds. Albex
shipments were down 32.9% from last year due to a general decline in the
business activity in manufacturing and most specifically the transportation
segments.
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Applications in the transportation market include truck trailers and
bodies, utility trailers, recreational vehicles, and railcars. Approximately
18%, 21%, and 22% of Albex's net sales in 2001, 2000, and 1999, respectively,
were to Ravens. These sales and intercompany inventory profits have been
eliminated from the consolidated financial statements.
Primary uses in the building and construction markets are structural
beams and components for buildings, road sign supports, and components for
highway and bridge construction. Examples of consumer durables are components
for boats, sports and exercise equipment, greenhouses, and durable medical
equipment. Albex produces a wide variety of standard shapes such as angles,
bars, channels, pipes, and beams that are purchased by distributors for resale
to end users.
Albex constructed an aluminum billet casting facility in 1997 in order
to recycle aluminum scrap generated internally and purchased from suppliers into
aluminum billet to be used for producing extrusions and to sell to customers.
The aluminum billet market suffered a dramatic drop in demand. Coupled with
significant drop in Ravens orders, Albex suspended production at the cast house
in November 2000 until the overall market improves to historical levels. Billet
supplies are readily available at competitive prices from other producers.
SABI
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SABI is a fully automated manufacturer of aluminum sign blanks and
traffic, warning, and street signs. SABI distributes its manufactured products
and purchased sign posts to a market approximating $350 million per year.
Approximately two-thirds of SABI's sales are to fabricator/dealers who purchase
aluminum blanks, cover them with reflective sheeting that is often silk
screened, and then sell the finished signs to governmental agencies.
Approximately one-third of SABI's sales are directly to governmental agencies in
the form of blanks or signs silk screened by SABI's print shop. Most sales are
to customers east of the Mississippi River. SABI's business is not generally
seasonal.
Backlog
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Ravens' backlog of orders for new trailers amounted to approximately
$1,700,000 at May 31, 2001 compared to approximately $5,009,000 at May 31, 2000.
The backlog is expected to be completed in the current fiscal year. The order
backlogs for the extrusion and sign industries are not relevant due to the
nature of the industries and customers. These backlogs tend to be low and of
short duration.
Distribution and Service
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Ravens
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Ravens sells and services truck trailers nationally through 71 trailer
dealerships located in 32 states and 4 dealerships located in Canada. Ravens
owns trailer and parts sales branches located in Dover, Ohio. In addition,
Ravens has regional sales managers who support the dealerships and solicit
direct sales from fleet customers.
Service and maintenance on Ravens' products are performed by its Dover,
Ohio service branch. The Company approved garages, repair shops, and customers
are also authorized to service its products.
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Ravens assists in financing its trailer sales to customers by
guaranteeing the time payment notes of customers with acceptable credit standing
to a finance company. See Note 8 to the consolidated financial statements as to
contingent liabilities with respect to these notes.
Ravens accepts used trailers as trade-ins on sales of new trailers and
purchases used trailers for resale. Ravens generally reconditions these used
trailers when necessary and holds them for resale. Ravens does not generally
lease trailers.
Albex
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Albex utilizes its own sales force and manufacturer representatives
to solicit orders from distributors and other customers. Albex also toll
processes metal owned by customers into billets and extrusions.
SABI
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SABI solicits sales mainly through telephone contacts with customers
and through independent sales representatives.
Raw Materials
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Aluminum in the form of coil, sheet, plate, primary ingot, billet and
scrap is the principal raw material used by the Company. The Company also
purchases components such as reflective sheeting, tires, wheels, axles and other
hardware items. The Company is not dependent upon any single supplier for
aluminum or other raw materials and components; however, a significant increase
in the price or an interruption in the supply of aluminum could adversely affect
the Company.
Competition
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Ravens
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Ravens competes nationally in the platform trailer and dump trailer
categories of the diverse and highly competitive truck trailer industry. There
are approximately 90 companies who manufacture aluminum, composite (aluminum and
steel), and steel platform and/or dump trailers. A majority of these companies
compete within local or regional areas.
Ravens has developed product design, manufacturing, and marketing
expertise for aluminum platform and dump trailers. Aluminum trailers, compared
to composite and steel trailers, are lighter, enabling a larger payload to be
hauled, last longer, require less maintenance, and have higher resale and scrap
values. These factors are distinct advantages of aluminum trailers, but the
higher cost of aluminum compared to steel requires a larger investment by the
customer.
Ravens is recognized as a leading manufacturer of aluminum platform
trailers. Ravens believes that there are no more than 10 manufacturers of
aluminum platform trailers, of which four account for approximately 90-95% of
the units produced. Ravens believes, based upon 2000 estimates of units
registered, that Ravens' market share was approximately 25% and that East
Manufacturing Corporation, Benson Truck Bodies, Inc., and Reitnouer, Inc. had
market shares of approximately 21%, 17%, and 32%, respectively. Ravens strives
to compete based upon product performance, but economic conditions and
competition with aluminum, composite, and steel manufacturers have caused the
importance of price to increase.
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Ravens commenced production of platform trailers in its Kent, Ohio
facility in June 1995 and in October 1996 introduced the FleetHawk, a platform
trailer designed to compete more effectively against composite trailers sold to
the more cost conscious fleet customer. The FleetHawk is heavier but less
expensive than the Ravens Eclipse II Classic. Ravens believes that the higher
initial cost of the FleetHawk can be more than recovered through lighter weight
and lower operating costs than the composite trailer offered by competitors.
Ravens also introduced an aluminum flatbed truck body with the same features as
the Eclipse II Classic flatbed (platform) trailer. Ravens introduced a dropdeck
platform trailer in March 1998.
In April 1999, Ravens purchased the assets of Galbreath's steel dump
line of trailers at Knox, Indiana. This acquisition complements Ravens' aluminum
line of trailers and allows the Company to compete in demolition, scrap, boulder
dump and other heavy-duty operations that require steel trailers. Ravens uses a
stronger heat-treated steel such as AR-400 to produce a longer lasting steel
trailer and employs a 2000 ton brake press in the manufacture of steel trailers.
Ravens is able to form the required steel materials in single section, which
gives it an advantage over a competitor that must weld multiple sections to form
the steel dump trailer body.
Albex
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The aluminum extrusion industry is highly competitive. Although there
are more than 100 companies in North America that participate, the industry has
begun to consolidate as large aluminum companies have acquired major extrusion
manufacturers. The Company's principal competitors now include Alcoa, Kaiser,
Indalex, Norsk and Hydro Wells Aluminum. Success in the industry turns on a
company's ability to supply a quality product on time at a fair price. Albex has
positioned itself well in the industry with the three extrusion presses, ISO
9002 certification, fabrication capabilities and strong customer orientation.
This combination of attributes appeals to both current and prospective customers
as they seek a supplier that understands the needs of growing companies.
SABI
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SABI believes that it is one of the four largest companies who together
account for approximately 25% of the sign market and that its market share
approximates 5-6%. The other three companies are Hall Signs, Inc., Newman
Traffic Signs, Inc. (Newman), and Vulcan, Inc. Newman competes against SABI in
all geographic markets, whereas the others are strong in particular geographic
areas. A large number of other manufacturers, fabricator/dealers, and
governmental sign shops account for the other 75% of the sign market.
Patents and Trademarks
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Ravens has a registered trademark for its swirl design finish on its
manufactured products. Ravens believes that the swirl finish is a cosmetic
feature which favorably distinguishes its trailers and bodies from competitors'
products.
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Employees
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The Company currently employs approximately 296 administrative, sales,
engineering, production, and repair and service personnel. The hourly personnel
at the Ravens facility in Dover, Ohio are represented by the International
Association of Machinists and Aerospace Workers, AFL-CIO, under an agreement
which expires on April 18, 2002. The hourly production employees at the Ravens
Kent, Ohio facility are represented by the International Association of Bridge,
Structural and Ornamental Iron Workers, AFL-CIO, under an agreement that expires
on April 15, 2004. The United Steelworkers of America, AFL-CIO, represent
Albex's hourly production employees under an agreement which expires on June 5,
2002. SABI's hourly production employees are represented under an agreement
expiring on December 31, 2003 with The Glass, Molders, Pottery, Plastics &
Allied Workers International Union, AFL-CIO.
Regulation
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Truck trailer length, height, width, maximum capacity and other
specifications are regulated by the U.S. Government and State Governments. The
U.S. Government also regulates certain safety features incorporated in the
design of truck trailers.
Environmental Matters
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The Company's facilities are subject to the environmental laws and
regulations of the jurisdictions in which they are located. RVM believes that
the environmental standards maintained at such locations meet applicable
regulatory requirements. The Company's operations, like those of other
competitors in basic industries, have in recent years become subject to
increasingly stringent legislation and regulations with regard to protection of
human health and the environment. More rigorous policies and requirements may be
imposed in the future. Although RVM is not aware of any specific measures or
expenditures that will be required, compliance with such laws, regulations or
policies may require expenditures in the future.
ITEM 2. PROPERTIES
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Ravens leases approximately 11,000 square feet of office space for its
corporate office in Akron, Ohio.
Ravens owns a manufacturing facility on an 8 acre site in Jacksonville,
North Carolina. This facility is comprised of a prestressed concrete building
that contains approximately 43,200 square feet of fabrication area and a
concrete block building with approximately 3,000 square feet of space for
washing and painting trailers.
Ravens commenced production in June 1995 at a 22 acre site owned by
Ravens in Kent, Ohio. The building consists of approximately 95,000 square feet
primarily of steel construction. Ravens completed construction of a 62,000
square foot steel building at its Kent property on April 30, 1999. The building
houses aluminum cut-to-length equipment and provides space for manufacturing new
products.
Steel dump production began in April 1999 at a 6 acre site with two
buildings leased by Ravens in Knox, Indiana. The main building is approximately
55,000 square feet; a brake press building of 4,900 square feet was completed in
November 1999.
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Ravens has sufficient production capacity at the Jacksonville, Knox and
Kent facilities to meet current and projected demand for its current products.
The branch in Dover, Ohio is housed in three buildings of cement block
construction with approximately 25,000 square feet of floor area on 3.5 acres of
land. This property is utilized for trailer sales, service, and repairs. The
building contains offices, storage space, and shop space. Yard area is utilized
for storage of new and used trailers and trailers in process of repair and
maintenance. Ravens owns the land and buildings.
Ravens also owns land and buildings situated on approximately 9.2 acres
adjacent to the branch facility in Dover, Ohio. From 1995 to 1997, Ravens
utilized the buildings, constructed primarily of concrete block and totaling
approximately 36,000 square feet, for manufacturing of utility, snowmobile, and
personal watercraft trailers. Ravens relocated the wholesale parts business from
Parkersburg, West Virginia in July 1998 to this property.
Albex owns a 47 acre site in Canton, Ohio. The extrusion operation and
administrative offices are located in a 250,000 square foot building constructed
primarily of brick. A 36,000 square foot prefabricated steel building houses the
billet casting operation. RVM believes that Albex has sufficient production
capacity to meet current and projected demand for its current products.
SABI operates in a leased 64,000 square foot predominantly steel and
concrete block building in Akron, Ohio. RVM believes that SABI has sufficient
production capacity to meet current and projected demand for its products.
Certain owned property of the Company is subject to mortgages and is
collateral for lines of credit and a letter of credit. See Notes 6 and 7 to the
consolidated financial statements.
ITEM 3. LEGAL PROCEEDINGS
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The Company, Albex, and an unrelated party are defendants in a wrongful
death and employer intentional tort claim. The defendants and their insurance
companies with the plaintiff are interested in settling the claim for a
reasonable amount. In cases like this where there are many underlying facts that
are disputed it is difficult to predict a favorable or unfavorable outcome. If
the plaintiff prevails against the Company, liability is significant, as the
jury will have broad discretion to fix the amount of damages it awards for both
compensatory and punitive damages. The Company believes in the strength of its
defense and intends to assert them if a trial is necessary. The Company also
believes any settlement is within the limits of its insurance policies.
The Company is involved in various claims and litigation arising in the
ordinary course of business. Management believes that the outcome of such claims
will not have a material adverse effect on the Company's financial position and
results of operations and cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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There were no matters submitted to a vote of security holders in the
quarter ended March 31, 2001.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
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MATTERS
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RVM's common stock (trading symbol "RVMI") is traded over-the-counter
and quoted on the OTC Bulletin Board and on "pink sheets" which are published
periodically. The high and low trade prices and shares traded of RVM's common
stock as reported by the OTC Bulletin Board for each quarterly period during the
last two fiscal years were as follows:
SHARES
HIGH LOW TRADED
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2001
First quarter 4.750 4.000 7,900
Second quarter 4.750 4.000 11,800
Third quarter 4.250 4.125 3,700
Fourth quarter 4.250 4.000 2,500
2000
First quarter 4.500 4.500 2,800
Second quarter 5.500 4.250 12,400
Third quarter 4.875 4.500 73,000
Fourth quarter 4.750 3.000 7,200
The trade prices do not include retail mark-ups, mark-downs or
commissions.
RVM has not paid dividends in the last two years and is restricted
from paying dividends by its loan agreements. Payment of dividends is within the
discretion of RVM's Board of Directors and will depend on, among other factors,
earnings, capital requirements and the operating and financial condition of the
Company. RVM does not presently intend to pay dividends in the foreseeable
future.
There were approximately 3,700 holders of record of the Registrant's
common stock as of June 1 2001. See Item 12.
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ITEM 6. SELECTED FINANCIAL DATA FOR THE YEARS ENDED MARCH 31
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This information should be read in conjunction with the consolidated financial
statements and the related notes in Item 8 and Management's Discussion and
Analysis of Financial Condition and Results of Operations in Item 7.
2001 2000 1999 1998 1997
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Net sales $ 61,869,583 $ 91,986,494 $ 83,035,031 $ 79,903,238 $ 61,638,221
Income (loss) from operations (2,577,202) 1,308,254 (1) 4,215,888 4,936,300 1,960,772 (4)
Unusual (expense) income items 0 0 0 0 (390,015)(5)
Income (loss) before income taxes and
accounting change (5,248,878) (820,280) 2,565,591 3,518,657 586,401
Cumulative effect of accounting change (3) 0 0 0 211,651 0
Net income (loss) (4,244,526) (535,451) 1,533,341 1,821,944 80,939
Basic and diluted earnings per share: (2)
Income before cumulative effect of
accounting change $ (2.19) $ (0.28) $ 0.79 $ 1.05
Cumulative effect of accounting change 0.00 0.00 0.00 (0.11)
------------ ------------ ------------ ------------
Net income (loss) $ (2.19) $ (0.28) $ 0.79 $ 0.94
============ ============ ============ ============
Pro forma basic and diluted earnings per
share $ 1.09 $ 0.19
Average number of shares used in
computation of per share amounts 1,937,505 1,937,498 1,936,756 1,935,776 1,938,140
Cash dividends declared per common share
$ 0 $ 0 $ 0 $ 0 $ 0
Total assets 43,702,603 53,731,708 48,999,890 48,348,030 38,567,375
Total long-term obligations 3,873,907 30,760,387 27,866,431 26,995,189 18,295,499
Working capital (15,045,502) 15,412,492 10,655,095 10,591,297 2,181,245
Shareholders' equity 4,644,533 8,889,059 9,422,510 7,888,169 6,056,225
(1) Includes loss of $2,573,016 for impairment of long-lived assets.
(2) Historical earnings per share information for 1997 is not presented
because Albex and SABI were not tax paying entities in that year and,
therefore, the historical results of operations are not indicative of the
operating results of the Company on an ongoing basis.
(3) Net loss for Albex and SABI for the quarter ended March 31, 1997
recorded as accounting change as Albex and SABI changed their fiscal year
ends from December 31 to March 31.
(4) Includes loss of $371,768 for impairment of long-lived assets.
(5) Loss on pension settlement.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
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Overview
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The year 2001 was very difficult for the Company. As discussed below sales
declined 32.7% from the previous year. Each quarter's sales were also lower from
the previous year's quarter, with fourth quarter sales being 51.4% lower than
fourth quarter 2000. The Company instituted significant cost cutting moves in
all divisions and in all functions. Inventories and receivables were reduced,
capital spending was delayed and all interest and debt payments were made. Both
Albex and Ravens' break-even levels were reduced as manufacturing, selling and
general and administrative costs were reduced. The Company has kept our lenders
and suppliers informed about the financial condition of the Company and have
maintained good relations.
Interest rates, gasoline prices, and the tightening of lending institutions
credit policies affected our primary markets for both Ravens and Albex. The
outlook for the two companies' markets are generally not strong for the next few
quarters. Our current lenders are working with us through the downturn in the
economy; however, RVM has not been able to secure replacement financing for the
Company after our current line of credit expires on August 31, 2001. Management
will take the appropriative actions required through a combination of
alternatives available to the Company. Management believes that the financial
success of the company relies in an increase in the overall economic up turn in
the market we serve, as market share issues had little to no effect on our loss
sales. As interest rates decrease, gasoline prices decline and credit becomes
easier to obtain, management believes that our markets served will return to
historic levels and the Company will return to profitability.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $1,108,115 and $793,122
at March 31, 2001 and 2000, respectively. The Company could have borrowed
approximately $927,856 more on a line of credit at March 31, 2001. As discussed
in footnote 6, in Notes to the Consolidated Financial Statements, the company
was not in compliance with the bank covenant on cash flow coverage and minimum
net worth. The Company owes FirstMerit as of March 31, 2001, $14,039,750 on the
$20,000,000 note secured by all the Company's inventory and receivables and
$5,118,023 on two long term notes secured by certain fixed assets at Albex and
Ravens.
The Company has been unable to obtain waivers of the covenant
violations or renew its letter of credit with the bank. The current default
renders the debt callable and as a result, the debt has been classified as a
current liability on the balance sheet. In addition, default of this debt
resulted in the letter of credit and other long term debt totaling $3,941,727 to
be in default. This debt has also been classified as a current liability on the
balance sheet. As such, there is doubt about the Company's ability to continue
to operate as a going concern.
In June, 2001, the Company and FM agreed in principle to an extension
of the line of credit and the letter of credit until June 30, 2002. All covenant
violations were also waived. The Company expects to have a signed agreement in
July, 2001.
The financial statements in this document have been prepared on a
going concern basis, which contemplates, the realization of assets and
liabilities in the normal course of business. The financial statements do not
include any adjustments relating to the recoverability and classification of
assets carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.
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2001
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Net cash provided by operating activities was primarily used to pay
down both the line of credit and the long-term debt. Year end inventories and
receivables were reduced $4,006,551 and $5,011,645 respectively due to the lower
sales from prior year of 32.7% and management programs to maintain receivables
within terms and reduce inventories to current production levels. Refundable
income taxes reflect the application of our current year tax loss carried back
the two previous years allowed by law for taxed paid. The Company also utilized
the remaining $227,801 of funds held by trustees for capital expenditures.
The Company made capital expenditures of $2,072,676 during the last
fiscal year. Albex invested approximately $1,800,000 used mainly for the
expansion of the packaging and shipping department, upgrading the large
extrusion press, production dies and other manufacturing equipment. Ravens
invested approximately $194,000 used mainly for the installation of the
environmental equipment, totaling $174,000, at the Dover facility and remaining
amount on other manufacturing equipment. SABI invested approximately $77,000
used mainly for the replacement of forklift trucks.
The Company received proceeds from the sale of fixed assets for
$946,338. Assets held for resale (see Note 16) were sold for $877,500 in the
current year, which resulted in a gain on sale of assets held for resale of
$324,499.
Accounts payable and accounts payable related parties increased
$795,161 and decreased $36,008 respectively. The increase was achieved through
negotiations with our vendors to allow extended payment terms on our trade
payables.
Notes payable related parties (see Note 12) both long and short term
increased by $909,258, which were used to fund the capital expenditures at
Albex.
The Company reduced the FirstMerit line of credit loan by $3,369,671
and the term loans by $977,603. Other long term debt payments were made during
the year of $1,223,284 for both the Kent Bonds and the State of Ohio loans.
(see Note 7)
2000
- ----
Net cash used in operating activities was primarily for working
capital to support the Knox plant and also at Ravens and Albex for inventory to
support higher sales volume. Offsetting the majority of the increase in working
capital was the non-cash impairment to machinery and equipment expense (see Note
16) and an increase in other current liabilities.
The Company made capital expenditures of $3,638,351 during the last
fiscal year, as follows. Ravens expended approximately $1,200,000 for the
purchase of equipment used in its Knox facility, $337,000 for completion of the
Cut to Length line at Kent, and $432,000 for the purchase of miscellaneous
equipment used at other plants. Albex invested approximately $1,470,000 in
upgrades and improvements to equipment and buildings. Signs and Blanks spent
approximately $209,000 primarily for new computer hardware to become Year 2000
compliant.
On April 8, 1999 and amended on September 30, 1999, the Company
entered into a long-term note with FirstMerit N.A. for $1,614,220. The funds
were used by Ravens to purchase the Knox facility equipment and for additional
capital equipment.
13
14
1999
- ----
Cash provided by operating activities of $3,411,718 was used mainly
for capital expenditures. Albex completed the aluminum billet casting facility
and the scrap handling equipment. Ravens used capital expenditures for
construction of a new building for the Kent, Ohio facility. Working capital
increased to $10,655,095 at March 31, 1999, from $10,591,297 at March 31, 1998.
RESULTS OF OPERATIONS
Years Ended March 31, 2001 and 2000
- -----------------------------------
Net sales of $61,869,583 decreased by $30,116,911 or 32.7%. Net sales
were severely affected at both Ravens and Albex. Gross profit margins decreased
to 6.5% in 2001 from 12.1% in 2000. All divisions were affected by lower selling
prices due to competitive pressures and higher manufacturing cost as volume
dropped at a higher rate than what cost could be reduced. Selling and general
administrative cost increase as a percent of sale to 11.2% in 2001 from 7.9% in
2000 as sales decreased faster than expenses. Actual dollars spent decreased
9.4% as management had salaried personnel layoffs and cost reduction programs
implemented through the year. Interest expense increased due to the increase in
the prime rate. Overall borrowing was lowered during the year. Overall net loss
increased to $(4,244,526) from $(535,451) in 2000.
See Note 9 to the Consolidated Financial Statements for discussion on
income taxes. As part of Statement on Financial Standards Number 109 Accounting
for Income Taxes requirements, the Company provided a valuation reserve for the
estimated tax effect of not being able to utilize the tax loss carried forward
for future years (a part of the deferred tax asset on the balance sheet). The
result was a reduction in the income tax benefit in 2001 of $858,000 which
increased the net loss for the year by the same amount. Each year the valuation
reserve will be reviewed. An appropriative adjustment will be made based upon
the financial condition of the Company at that fiscal year end and the ability
of the Company to utilize the tax loss carried forward.
Net sales at Ravens decreased 38.8% to $34,986,971, as unit shipments
were severely impacted by market conditions. Starting in the first quarter of
2000 fuel prices and interest rates increases and lending sources began
tightening credit available to customers. These factors continued throughout the
year and sales to dealers and fleets were severely affected. As bankruptcies of
fleets and of owner operators began to increase throughout the year, more used
equipment in excellent condition became available. The higher than normal
availability of used equipment further reduced shipments from manufacturers.
Gross Profit Percent of Sales decreased to 11.9% in 2001 from 16.1% in 2000.
Lower selling prices to meet market conditions reduced gross profits.
Substantial cost reduction programs including personnel reductions were
implemented. However, manufacturing cost were spread over much fewer units thus
generating higher unit costs and reducing profitability. Selling and general
administrative cost increased as a percent of net sales to 12.5% form 7.8% as
absolute dollars spent decreased 1.9%. Operating income decreased to a loss of
$(217,159) from an operating profit of $4,775,309 in 2000.
Net sales at Albex to non-related customers decreased 29.8% to
$17,425,597. Albex sales were affected by the overall slowdown in the economy
and the substantial loss of sales to the transportation market. As planned the
gas furnaces in the cast house increased the reliability of the volume output
and reduced the operating cost. However, a world wide surplus of aluminum billet
and the reduction of extrusion sales eliminated the potential of selling the
excess aluminum billet capacity to outside customers. The cast house production
was suspended in November 2000. Overall gross profit decreased to a negative
4.6% in 2001 from 2.0%. The loss at the gross profit level was due to the low
cast house production volume in the first two quarters of the year and the cost
to suspend production in November. Extrusion gross profit was also lower due to
low volume periods in which cost could not be reduced faster than the volume
loss. Selling and general administrative expenses increased to 8.1% in 2001 from
14
15
5.6% in 2000, as overall spending was reduced 2.9%. Operating loss improved to a
loss of $(2,362,054) from a loss of $(3,692,472) in 2000.
SABI net sales decreased by 5.4% to $9,457,015 as the Company closed
unprofitable sales offices in North Dakota and Pennsylvania. Gross profits
decreased to 8.3% in 2001 from 12.8% in 2000. Margins were impacted by higher
material cost that could not be passed onto customers. Selling and general
administrative costs decreased to 8.7% of net sales from 10.6% in 2000, as
overall spending was reduced by 21.7%.
Years Ended March 31, 2000 and 1999
- -----------------------------------
Net sales of $91,986,494 increased $8,951,463 or 10.8% in 2000, mainly
due to increases in both trailer sales at Ravens and the higher volume of
aluminum extrusion and billet sales by Albex. Gross profit increased 3.6% to
$11,157,361 in 2000 from $10,770,665 in 1999. Gross profit margin percent of net
sales decreased to 12.1% in 2000 from 13.0% in 1999. The consolidated gross
profit percentage decreased due to higher costs and the mix of more Albex sales
with lower gross margin compared to Ravens and SABI. Selling, general and
administrative expenses remained at 7.9% of net sales. On March 30, 2000 the
Board of Directors approved the operating plan for Albex in which certain
equipment used would be discontinued and a before tax $2,573,016 charge related
to the impairment of machinery and equipment was recognized (see Note 15).
Interest expense increased mainly due to more debt outstanding during 2000
compared to 1999 and an increase in the prime rate. See Note 9 to the
consolidated financial statements for a discussion of income taxes. Overall the
Company sustained a net loss of $535,451 for 2000 (a net income of $1,144,213
before the charge related to the impairment of machinery and equipment) compared
to a net income of $1,533,341 in 1999.
Ravens' net sales increased $6,395,130 or 12.6% due to higher dump
trailer sales and the additional sales of steel trailers from the Knox plant.
The Knox facility was profitable for 2000 due to the additional capital
equipment and improved utilization of the plant. Overall gross profit increased
4.5% to $9,237,232 in 2000 from $8,835,032 in 1999. Gross profit as a percent of
net sales decreased to 16.1% in 2000 from 17.4% in 1999. The decrease was caused
mainly by mix of lower profitable steel and aluminum dumps and more fleet sales
of flats. Selling and general administrative cost decreased to 7.8% of net sales
in 2000 from 8.2% in 1999. Income from operations increased 2.3% to $4,775,309
in 2000 from $4,667,478 in 1999.
Albex's net sales to customers other than Ravens and SABI increased by
$4,248,774 or 15.6%. Gross profit increased to $639,520 in 2000 from $459,687 in
1999. Albex cast house facility was put into service in December 1998. Fixed
assets utilized in the production of the aluminum billet were deemed to be
unreliable and too expensive to operate. These assets were phased out in the
last quarter of the year and new equipment replaced some of the phased out
equipment. The expected improvement in profit due to higher sales and improved
efficiencies was not realized due to the higher cost and the unreliability of
the cast house equipment placed out of service. The Company recognized a fourth
quarter charge for the impairment of machinery and equipment of $2,573,016.
Selling and general administrative increased 17.8% to $1,758,976 in 2000 from
$1,491,000 in 1999. The higher cost was due mainly to higher selling expense,
ISO 9002 certification and professional fees. Overall the net loss from
operations increased to $3,692,472 in 2000 from $1,031,313 in 1999.
15
16
SABI's net sales decreased $1,161,014 or 10.4%. Lower sales were
caused by competitive conditions and a strike at a major vendor that limited
production in the third quarter. Gross profit as a percent on net sales
decreased to 12.8% in 2000 from 13.2% in 1999, as higher aluminum and other
material cost were not completely passed through to customers. Selling and
general administrative cost increased to 10.6% in 2000 from 8.0% in 1999. The
Company added sales offices in Pennsylvania and North Dakota. Operating profit
decreased to $219,342 in 2000 from $577,180 in 1999.
INFLATION
The Company does not believe that inflation has had a material effect
on the results of operations for the periods presented because of low inflation
levels during these periods.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this Form 10-K are made pursuant to the safe
harbor provisions of Rule 175 promulgated under the Securities Act of 1933. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected. Potential risks and
uncertainties include, but are not limited to: general business and economic
conditions; the financial strength of the industries which the company serves;
the competitive pricing environment within the markets which the Company serves;
labor disruptions; interruptions in the supply of raw materials and services; a
significant increase in the price of aluminum; continued availability of credit
from lenders and vendors; government regulations; and obsolescence of the
Company's products and manufacturing technologies.
16
17
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
DERIVATIVE FINANCIAL INSTRUMENTS
The Company does not hold or issue derivative financial instruments for any
purposes.
INTEREST RATE EXPOSURE
Based on the Company's overall interest rate exposure as of and during the year
ended March 31, 2001, a near-term change in interest rates, based on historical
interest rate movements, would not materially affect the Company's consolidated
financial position, results of operations or cash flows.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
Financial Statements: Pages
-------
Report of Independent Auditors 18
Consolidated Balance Sheets, March 31, 2001and 2000 19-20
Consolidated Statements of Operations
for the years ended March 31, 2001, 2000 and 1999 21
Consolidated Statements of Changes in Shareholders'
Equity for the years ended March 31, 2001, 2000 and 1999 22
Consolidated Statements of Cash Flows
for the years ended March 31, 2001, 2000 and 1999 23
Notes to Consolidated Financial Statements 24-41
Financial Statement Schedule:
II - Valuation and Qualifying Accounts
for the years ended March 31, 2001, 2000 and 1999 42
All other schedules are omitted because they are not applicable or the
required information is presented in the financial statements or the notes
thereto.
17
18
Report of Independent Auditors
To the Shareholders and Board of Directors
RVM Industries, Inc.
We have audited the accompanying consolidated balance sheets of RVM Industries,
Inc. and subsidiaries as of March 31, 2001 and 2000, and the related
consolidated statements of operations, and changes in shareholders' equity and
cash flows for each of the three years in the period ended March 31, 2001. Our
audit also included the financial statement schedule listed in Item 8. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of RVM
Industries, Inc. and subsidiaries at March 31, 2001 and 2000, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended March 31, 2001, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As more fully described in Note 2,
the Company has incurred recurring operating losses and has a working capital
deficiency. In addition, the Company has not complied with certain covenants of
loan agreements with FirstMerit Bank, N.A. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classifications of liabilities that may result from the outcome of this
uncertainty.
/S/ ERNST & YOUNG LLP
Akron, Ohio
July 9, 2001
18
19
RVM INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31
---------------------------------
2001 2000
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,108,115 $ 793,122
Receivables:
Trade, net of allowance for doubtful accounts of $125,199 and $128,000
in 2001 and 2000 5,877,800 10,889,445
Related party 66,478 147,826
Inventories 11,554,080 15,560,631
Refundable income taxes 966,536 0
Deferred income taxes, net of valuation allowance of $857,986 in 2001 146,235 1,217,700
Assets held for sale 90,843 643,844
Other current assets 328,574 242,186
------------- -------------
Total current assets 20,138,661 29,494,754
Property, plant and equipment, net 23,321,900 23,737,525
Funds held by trustee for capital expenditures 0 227,801
Other assets 242,042 271,628
------------- -------------
Total assets $ 43,702,603 $ 53,731,708
============= =============
The accompanying notes are an integral part of the consolidated
financial statements.
19
20
RVM INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS, Continued
MARCH 31
------------------------------------
2001 2000
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable--trade $ 8,262,685 $ 7,467,524
--related parties 251,531 287,539
Accrued expenses and liabilities:
Compensation 371,242 731,352
Product warranty 845,107 1,076,447
Other 1,647,948 1,883,345
Current portion of long-term debt--other 6,150 2,264,855
--related parties 700,000 371,200
Long term debt in default 23,099,500 0
------------ ------------
Total current liabilities 35,184,163 14,082,262
Note payable--bank 0 17,409,421
Long-term debt 431,364 9,433,316
Notes payable--related parties 3,296,308 2,715,850
Deferred income taxes 146,235 1,201,800
------------ ------------
Total liabilities 39,058,070 44,842,649
------------ ------------
Shareholders' equity:
Preferred stock, $0.01 par value; authorized shares, 300,000;
none outstanding 0 0
Common stock, $0.01 par value; authorized shares, 3,000,000;
issued and outstanding: 1,937,505 shares at March 31, 2001,
and at March 31, 2000
19,376 19,376
Additional capital 4,786,336 4,786,336
Retained (deficit) earnings (161,179) 4,083,347
------------ ------------
Total shareholders' equity 4,644,533 8,889,059
------------ ------------
Total liabilities and shareholders' equity $ 43,702,603 $ 53,731,708
============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
20
21
RVM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31
--------------------------------------------------------
2001 2000 1999
-------------- -------------- --------------
Net sales $ 61,869,583 $ 91,986,494 $ 83,035,031
Cost of sales 57,859,202 80,829,133 72,264,376
-------------- -------------- --------------
Gross profit 4,010,381 11,157,361 10,770,655
Selling general and administrative expenses 6,912,082 7,276,091 6,554,767
Impairment of machinery and equipment (324,499) 2,573,016 0
-------------- -------------- --------------
Income (loss) from operations (2,577,202) 1,308,254 4,215,888
Other income (expense):
Other income 50,242 77,335 153,440
Interest expense (2,526,865) (2,088,663) (1,922,974)
Gain (loss) on sales of property, plant and equipment (195,053) (117,206) 119,237
-------------- -------------- --------------
Total other expense, net (2,671,676) (2,128,534) (1,650,297)
-------------- -------------- --------------
Income (loss) before income taxes (5,248,878) (820,280) 2,565,591
Provision for income taxes (benefit) (1,004,352) (284,829) 1,032,250
-------------- -------------- --------------
Net income (loss) $ (4,244,526) $ (535,451) $ 1,533,341
============== ============== ==============
Basic and diluted earnings (loss) per share $ (2.19) $ (0.28) $ 0.79
============== ============== ==============
The accompanying notes are an integral part of the consolidated
financial statements.
21
22
RVM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended March 31, 2001, 2000, and 1999
RETAINED
COMMON ADDITIONAL EARNINGS
COMMON SHARES STOCK AMOUNT CAPITAL (DEFICIT) TOTAL
------------- ------------ ------------ ------------ ------------
Balance at March 31, 1998 1,936,755 $ 19,368 $ 4,783,344 $ 3,085,457 $ 7,888,169
Net income 1,533,341 1,533,341
Stock options exercised 250 3 997 1,000
------------ ------------ ------------ ------------ ------------
Balance at March 31, 1999 1,937,005 19,371 4,784,341 4,618,798 9,422,510
------------ ------------ ------------ ------------ ------------
Net loss (535,451) (535,451)
Stock options exercised 500 5 1,995 2,000
------------ ------------ ------------ ------------ ------------
Balance at March 31, 2000 1,937,505 19,376 4,786,336 4,083,347 8,889,059
------------ ------------ ------------ ------------ ------------
Net loss (4,244,526) (4,244,526)
------------ ------------ ------------ ------------ ------------
Balance at March 31, 2001 1,937,505 $ 19,376 $ 4,786,336 $ (161,179) $ 4,644,533
============ ============ ============ ============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
22
23
RVM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31
-------------------------------------------------
2001 2000 1999
------------- ------------- -------------
Cash flows from operating activities:
Net income (loss) .................................................. $ (4,244,526) $ (535,451) $ 1,533,341
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization .................................... 2,291,165 2,390,250 2,043,173
Impairment of machinery and equipment ............................ (324,499) 2,573,016 0
Deferred income taxes ............................................ 15,900 (877,900) 596,700
Increase (decrease) in allowance for doubtful
accounts ....................................................... (2,801) 21,000 20,000
(Gain) loss on disposition of property, plant and
equipment ...................................................... 195,051 117,218 (119,237)
Increase (decrease) in cash from changes in:
Receivables --trade .............................................. 5,014,446 (888,852) 132,511
--related party ...................................... 81,348 8,714 65,537
Inventories ...................................................... 4,006,550 (4,197,722) 698,360
Other assets ..................................................... (123,555) (55,119) (46,542)
Accounts payable --trade ......................................... 795,163 915,451 (2,185,414)
--related parties ............................... (36,009) 121,101 107,245
Accrued expenses and other current liabilities ................... (1,793,383) 995,736 566,044
------------- ------------- -------------
Net cash provided by operating activities ........................ 5,874,850 587,442 3,411,718
------------- ------------- -------------
Cash flows from investing activities:
Capital expenditures ............................................... (2,072,676) (3,038,351) (6,618,179)
Acquisition of business assets ..................................... 0 (1,265,000)
Proceeds from sale of property, plant
and equipment .................................................... 946,338 18,000 628,310
Investment of proceeds from long-term debt with trustees
and income earned on investment of proceeds ...................... (8,034) (13,295) (64,507)
Sale of investments and release of funds held
by trustees ...................................................... 235,835 321,077 1,806,859
------------- ------------- -------------
Net cash used in investing activities ............................ (898,537) (3,977,569) (4,247,517)
------------- ------------- -------------
Cash flows from financing activities:
Payments on long-term debt ......................................... (2,200,907) (1,735,830) (1,379,442)
(Payments on) proceeds from notes payable--bank, net ............... (3,369,671) 4,171,948 (342,327)
Proceeds from (payments on) notes payable to related
parties .......................................................... 909,258 (226,200) (516,200)
Proceeds from long-term debt, net of issuance costs ................ 0 1,642,841 2,555,130
Proceeds from stock options exercised .............................. 0 2,000 1,000
------------- ------------- -------------
Net cash (used in) provided by financing activities .............. (4,661,320) 3,854,759 318,161
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents .................. 314,993 464,632 (517,638)
Cash and cash equivalents at beginning of year ........................ 793,122 328,490 846,128
------------- ------------- -------------
Cash and cash equivalents at end of year .............................. $ 1,108,115 $ 793,122 $ 328,490
============= ============= =============
The accompanying notes are an integral part of the consolidated
financial statements.
23
24
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
1. Description of Business and Summary of Significant Accounting Policies:
----------------------------------------------------------------------
Description of Business:
-----------------------
References to "the Company" refer to RVM and its wholly owned
subsidiaries: Ravens, Albex and SABI.
Ravens designs, manufactures, and sells aluminum truck trailers and
bodies, including dump trailers, dump bodies and flatbed trailers used
in the highway transportation industry throughout the U.S. and Canada.
Ravens also manufactures a steel dump trailer, which serves the
demolition market. These principal products are sold direct and
through a nationwide network of dealerships. Ravens currently has
operating facilities in North Carolina, Ohio, and Indiana. Ravens also
sells a wide variety of after-market parts for trucks and trailers,
including parts for its own trailers.
Albex manufactures and sells custom and standard aluminum extruded
products to manufacturers, fabricators, and distributors in the
transportation, building and construction, consumer durables, and
other markets located mainly in the Midwestern portion of the U.S.
Albex operates a production facility located in Canton, Ohio. Albex
began production of aluminum billet in 1998 for its own use and for
customers. During the year the aluminum billet market suffered a
dramatic drop in demand. Coupled with the significant decrease on
Ravens orders, Albex suspended production at the Cast House in
November 2000 until the overall market improves to historical levels.
SABI manufactures and sells aluminum blank and finished traffic
control signs to fabricators, distributors, and governmental agencies
located throughout the U.S. but primarily east of the Mississippi
River. Its production facility is in Akron, Ohio.
Principles of Consolidation:
----------------------------
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All inter-company
transactions and balances have been eliminated in consolidation.
Fiscal Year:
-----------
The fiscal year of RVM ends on March 31. References to 2001, 2000, and
1999 are for the years ended March 31, 2001, 2000, and 1999
respectively
Use of Estimates:
-----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
24
25
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
1. Description of Business and Summary of Significant Accounting Policies,
-----------------------------------------------------------------------
Continued:
----------
Cash Equivalents:
-----------------
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents
Inventories:
------------
Inventories are valued at the lower of cost or market. The cost of
approximately 67% and 61% of the inventories at 2001 and 2000,
respectively, was determined under the last-in, first-out (LIFO)
method with the cost of the remainder of the inventories determined
under the first-in, first-out (FIFO) and weighted average methods of
valuation.
Property, Plant and Equipment:
------------------------------
Property, plant and equipment is stated at cost. Grants received from
state and local governmental units are deducted in arriving at the
carrying amount of the respective assets. Major additions and
betterments are capitalized while maintenance and repairs which do not
improve or extend the lives of the respective assets are expensed
currently.
Depreciation and amortization of property, plant and equipment,
including assets under capital lease obligations, are computed using
the straight-line method based on the estimated useful lives of the
assets. Accelerated depreciation methods are used for tax purposes.
The estimated useful lives of the assets for financial statement
purposes are as follows:
Buildings and improvements 31.5 to 40 years
Machinery and equipment 3 to 20 years
Office equipment 5 to 10 years
Vehicles 3 to 5 years
The carrying value of property, plant and equipment is evaluated if
circumstances indicate a possible impairment in value. If
undiscounted cash flows over the remaining depreciation period
indicate the property, plant and impairment may not be recoverable,
the carrying value will be reduced by the estimated shortfall of the
cash flows on a discounted basis.
Debt Discount and Expense:
-------------------------
Debt discount and expense are amortized on a straight-line basis,
which does not differ materially from the interest method, by charges
to expense over periods from date of issue to date of maturity.
25
26
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
1. Description of Business and Summary of Significant Accounting Policies,
-----------------------------------------------------------------------
Continued:
----------
Product Warranty Costs:
----------------------
Anticipated costs related to product warranty are expensed when the
products are sold.
Revenue Recognition:
-------------------
The Company recognizes revenue from the sale of trailers when title
and risks of ownership are transferred to the customer, which
generally is upon shipment or customer pick-up. A customer may be
invoiced for and receive title to trailers prior to taking physical
possession when the customer has made a fixed, written commitment to
purchase, the trailers have been completed and are available for
pick-up or delivery, and the customer has requested the Company to
hold the trailers until the customer determines the most economical
means of taking physical possession. Upon such a request, the Company
has no further obligation except to segregate the trailers, invoice
them under normal billing and credit terms, and hold them for a short
period of time as is customary in the industry, until pick-up or
delivery. Trailers are built to customer specification and no right of
return or exchange privileges are granted. Accordingly, no provision
of sales allowances or returns is recorded. Sales and related cost of
sales for goods and services other than trailers are recorded when
goods are shipped and services are rendered to customers.
Shipping and Handling:
---------------------
Shipping and handling costs are reflected in costs of sales.
Advertising Costs:
-----------------
Costs incurred for producing and communicating advertising are
expensed when incurred.
Advertising costs included in selling, general and administrative
expense were $183,402, $297,596, $220,790 in 2001, 2000, and 1999,
respectively.
Income Taxes:
-------------
The Company provides for income taxes based upon earnings reported for
financial statement purposes. Deferred tax assets and liabilities are
established for temporary differences between financial statement and
tax accounting bases using currently enacted tax rates in effect for
the years in which the differences are expected to reverse. A
valuation allowance is established for any deferred tax asset for
which realization is not likely.
26
27
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
1. Description of Business and Summary of Significant Accounting Policies,
----------------------------------------------------------------------
Continued:
----------
Earnings Per Share:
------------------
Basic earnings per share is based on net income divided by the
weighted average number of common shares outstanding. Diluted earnings
per share reflect the potential dilution that could occur if all
options or contracts to issue common stock were exercised or
converted. Weighted average number of common shares outstanding was
1,937,505, 1,937,498 and 1,936,756 in 2001, 2000 and 1999,
respectively. Basic earnings per share for the Company is the same as
diluted earnings per share.
Recent Accounting Pronouncements:
--------------------------------
In June 1998, the Financial Accounting Standards Board issued
Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended, which is required to be adopted in years
beginning after June 15, 2000. Management does not anticipate that the
adoption of the new Statement will have a significant effect on
earnings or the financial position of the Company.
2. Going Concern of the Company:
----------------------------
As of March 31, 2001, the Company was in violation of financial
covenants related to FirstMerit Bank, N.A. debt in the total amount of
$19,157,773. The current default renders the debt callable and as a
result, the debt has been classified as a current liability on the
balance sheet. In addition, the company was in default of other long
term debt resulting from this default on the FirstMerit letter of
credit. This debt amounted to $3,941,727 and has also been classified as
a current liability on the balance sheet. These conditions raise
substantial doubt as to the Company's ability to continue as a going
concern.
The Company has not been successful in obtaining replacement financing.
There are a number of options available to the Company, including but not
limited to, obtaining additional capital or long-term debt, selling
assets, or restructuring the debt. The Company has retained financial and
legal counsel to assist the Company throughout the process. There can be
no assurance that the Company will be successful in such efforts nor
satisfying the debt if called.
3. Acquisitions:
------------
On March 31, 1997, RVM purchased all the issued and outstanding shares of
capital stock of Albex and SABI from Jacob Pollock, the owner of all of
the shares of Albex and SABI and an officer, director, and the majority
shareholder (holding 87.16% of the outstanding common stock as of March
31, 1997) of RVM. This was a business combination by entities under the
common control of Jacob Pollock. The financial statements of prior years
were restated to reflect the combination on an "as if pooling of
interests" basis. The undistributed net loss of the S-corporations was
reclassified from accumulated deficit to additional capital. All
significant intercompany accounts and transactions have been eliminated.
27
28
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
3. Acquisitions, Continued:
-------------
The purchase price of the Albex and SABI shares was to be equal to seven
times the average earnings of Albex and SABI, computed for each company,
before interest, taxes plus depreciation and amortization and less
capital expenditures for the fiscal years ending March 31, 1999 and March
31, 2000, less all interest bearing debt, all determined in accordance
with generally accepted accounting principles (Albex and SABI Purchase
Prices). On March 30, 2000, the parties agreed to amend the purchase
agreement to change the calculation of the purchase price from each
company separately to the combined average earnings of both companies as
originally defined. Due to the loss at Albex exceeding the earnings at
SABI, RVM is not required to pay a dividend to Jacob Pollock for the
purchase of Albex and SABI.
On April 8, 1999, RVM acquired the assets and inventory of a steel
trailer manufacturing plant in Knox, Indiana, for approximately $1.2
million, which was recorded using the purchase method of accounting. The
plant produces a steel trailer product line that enhances the current
product line and is sold through the Ravens distribution network.
4. Inventories:
-----------
March 31 2001 2000
----------------- ----------------
Raw materials $ 4,749,949 $ 9,867,007
Work in process 2,121,205 2,291,961
Finished goods 4,682,926 3,401,663
----------------- ----------------
$ 11,554,080 $ 15,560,631
================= ================
The reserve to reduce the carrying value of inventories from current cost
to the LIFO basis amounted to approximately $1,911,000, and $2,066,000 at
March 31, 2001 and 2000, respectively.
28
29
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
5. Property, Plant and Equipment:
-----------------------------
March 31 2001 2000
------------------ ------------------
Buildings and improvements $ 11,215,975 $ 10,885,304
Machinery and equipment 20,887,802 19,845,494
Office equipment 1,806,349 1,782,574
Vehicles 875,294 862,536
Construction in progress 794,670 589,524
------------------ ------------------
35,580,090 33,965,432
Less accumulation depreciation and amortization 12,587,402 10,557,119
------------------ ------------------
22,992,688 23,408,313
Land 329,212 329,212
------------------ ------------------
$ 23,321,900 $ 23,737,525
================== ==================
Approximately $730,000, $1,460,000, and $2,800,000 of capital
expenditures were incurred in 2001, 2000, and 1999, respectively, for a
new production facility and casting house in Canton, Ohio. These capital
expenditures include capitalized interest of $22,939, $13,718, and
$35,734 in 2001, 2000, and 1999, respectively.
Approximately $27,000, $460,000, and $2,642,000, of capital expenditures
were incurred in 2001, 2000, and 1999, respectively, for a new production
facility in Kent, Ohio. These capital expenditures include capitalized
interest expense net of capitalized interest income of $0, $14,486, and
$113,426, in 2001, 2000, and 1999, respectively.
29
30
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
6. Long-term Debt in Default:
-------------------------
On September 30, 1999, the Company amended its line of credit agreement
with FirstMerit Bank, N.A. (FM). The agreement provides for borrowings up
to $20,000,000 based on eligible accounts receivable and inventories
expiring on August 31, 2001. Interest is at FM's prime rate (7.25% and
8.75% at March 31, 2001 and 2000, respectively) minus 1/4%. The agreement
is collateralized by accounts receivable, inventory, equipment, cash,
intangibles and certain real estate. There are covenants relating to the
payment of dividends, acquiring treasury stock, the creation of
additional indebtedness, minimum tangible net worth, and cash flow
coverage. The Company was not in compliance with the cash flow coverage
for both years ending March 31, 2001 and 2000 and the minimum net worth
covenant for the year ended March 31, 2001. The Company is in default of
the loans and FM has not recalled the note (See Note 2). The Company
could have borrowed approximately $927,856 more than the amount owed FM
at March 31, 2001. The Company owed $14,039,750 and $17,409,421 under
this agreement at March 31, 2001 and 2000, respectively.
On September 30, 1997, the Company and FM entered into a $5,000,000 fixed
asset term loan agreement for the financing of certain existing and to be
acquired fixed assets. Interest is at FM's prime rate. Repayment terms
are interest only for two years and principal plus interest for seven
years. The Company owed $3,988,075 under this agreement at March 31,
2001. This note is also in default because the Company is not in
compliance with two of the loan's covenants.
Jacob Pollock provided a $2,500,000 personal guarantee on the above loan
agreements.
On April 8, 1999, the Company entered into a long-term note with FM for
$1,100,000 which was amended on September 30, 1999 to increase the note
to $1,614,200. The funds were used by Ravens to purchase the Knox
facility assets and to purchase additional capital equipment. The note is
payable on a monthly installment through September 30, 2004 plus interest
at the lender's prime rate. The Company owed $1,129,948 under this
agreement on March 31, 2001. This note is also in default because the
Company is not in compliance with two of the loan's covenants.
As a result of the FM debt being in default, a letter of credit from FM
and other long term debt amounting to $3,941,727 was in default as of
March 31, 2001. This debt has been classified as a current liability on
the balance sheet (see Note 7).
30
31
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
7. Financial Obligations:
---------------------
March 31 2001 2000
------------------- ------------------
Line of credit agreement (see Note 6) $14,039,750 $17,409,421
City of Kent, Ohio (a) 2,650,000 3,100,000
Department of Development of the State of Ohio (b) 726,727 1,125,208
State of Ohio Economic Development Revenue Bonds (c) 565,000 910,000
Fixed asset term loan agreement (see Note 6) 3,988,075 4,642,850
7% subordinated debentures, payable in 2004, net of unamortized
discount of $30,301 and $37,689 414,633 410,199
Knox Acquisition Note Payable (see Note 6) 1,129,948 1,452,796
Other 22,881 57,118
------------------- ------------------
23,537,014 29,107,592
Debt in default 23,099,500 0
------------------- ------------------
437,514 29,107,592
Less current portion 6,150 2,264,855
------------------- ------------------
$ 431,364 $26,842,737
=================== ==================
(a) City of Kent, Ohio Variable Rate Demand Industrial Development Revenue
Bonds due in annual principal payments of $500,000 in 2002 through 2005,
$150,000 in 2006 through 2008, and $100,000 in 2009 and 2010. Interest is
payable monthly and the rate varies weekly (3.8% and 4.985% at March 31,
2001 and 2000, respectively). Payment to bondholders is guaranteed by a
letter of credit in an amount equal to outstanding principal plus specified
interest ($2,702,274 at March 31, 2001) expiring December 15, 2001, issued
by FirstMerit Bank, N.A. at a rate of 1% per annum and collateralized by
all equipment owned by Ravens and by the real estate at the Kent facility
and cross-collateralized with the lines of credit described in Note 6.
Proceeds from the loan agreement are held by a trustee and released to
Ravens for approved capital expenditures at the Kent facility. $0 and
$227,801 held by the trustee at March 31, 2001 and 2000 respectively, were
invested in short-term commercial paper and a money market fund. This debt
is in default due to the acceleration of payment required by the FirstMerit
debt obligations.
31
32
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
7. Financial Obligations (Continued):
---------------------
(b) Chapter 166 Direct Loan payable to the Department of Development
of the State of Ohio, due in monthly installments of $35,566
including interest at 3.0%. The loan matures December 2002 and is
collateralized by substantially all machinery and equipment of
Albex, the corporate guarantees of Ravens and SABI, and the
personal guarantees of Jacob Pollock, Richard D. Pollock and
Gertrude Pollock, the wife of Jacob Pollock. This debt is in
default due to the acceleration of payment required by the
FirstMerit debt obligations.
(c) State of Ohio Economic Development Revenue Bonds are subject to a
mandatory semiannual redemption schedule which requires monthly
escrow payments of approximately $33,000 including interest at
5.6%. The bonds mature June 1, 2002, and are collateralized by
substantially all machinery and equipment of Albex, the corporate
guarantees of Ravens and SABI, and the personal guarantees of
Jacob Pollock, Richard D. Pollock and Gertrude Pollock.
The Chapter 166 Direct Loan and the State of Ohio Economic
Development Revenue Bonds contain covenants which limit Albex in
certain areas including, among others, total long-term debt to
tangible net worth, minimum tangible net worth and dividend
payments. RVM's financial statements in place of Albex's for the
purpose of the financial covenant calculations.
Maturities for long-term debt are:
Debt Listed Albex and SABI
Above Notes (1) Total
----------------- ------------------ ------------------
2002 $ 23,105,650 $ 700,000 $ 23,805,650
2003 6,150 768,749 774,899
2004 6,150 807,970 814,120
2005 419,064 699,226 1,118,290
2006 0 717,279 717,279
Thereafter 0 303,084 303,084
----------------- ------------------ ------------------
$ 23,537,014 $ 3,996,308 $ 27,533,322
================= ================== ==================
(1) See Note 12.
32
33
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
8. Commitments and Contingent Liabilities:
--------------------------------------
At March 31, 2001 and 2000, Ravens was contingently liable as guarantor
on certain sales contracts of customers in the amount of approximately
$406,000 and $511,000, respectively, which are collateralized by the
units sold. No reserve for losses has been provided because Ravens has
incurred an insignificant amount of losses related to guaranteed sales
contracts which generally have maturities less than five years. Ravens
guarantees 10-20% of the outstanding balance owed to the finance company
by the customers. Ravens recognizes revenue at the time the trailers are
sold.
During March 2000, Ravens sold aluminum flatbed trailers to a customer.
The Company guaranteed a portion of the financing for the customer. In
March 2001, the customer filed a voluntary petition under Chapter 11 of
the United States Bankruptcy Code. The financing company demanded the
amount owed by the customer on the note of $912,000. The customer has
made all interest and principal payments since filing for bankruptcy and
intends on continuing making payments, accordingly, the Company has not
agreed to assume any liability of the note. It is too early to determine
the probability of an unfavorable outcome on this claim however; if the
claim is unfavorable the Company has the right to take possession of the
trailers.
The Company, Albex and an unrelated party are defendants in a wrongful
death and employer intentional tort claim. The defendants and their
insurance companies with the plaintiff are interested in settling the
claim for a reasonable amount. In cases like this where there are many
underlying facts that are disputed it is difficult to predict a favorable
or unfavorable outcome. If the plaintiff prevails against the Company,
liability is significant as the jury will have broad discretion to fix
the amount of damages it awards for both compensatory and punitive
damages. The Company believes in the strength of its defense and intends
to assert them if a trial is necessary. The Company also believes any
settlement is within the limits of its insurance policies.
The Company is also involved in other claims and litigation arising in
the ordinary course of business. Management believes that the outcome of
such claims will not have a material adverse effect on the Company's
financial position and results of operations and cash flows.
9. Income Taxes:
------------
The provision (benefit) for income taxes consists of the following:
2001 2000 1999
----------------- ----------------- ------------------
Current:
Federal $ (1,020,252) $ 617,071 $ 401,867
State (24,000) 33,683
----------------- ----------------- ------------------
(1,020,252) 593,071 435,550
Deferred 15,900 (877,900) 596,700
----------------- ----------------- ------------------
$ (1,004,352) $ (284,829) $ 1,032,250
================= ================= ==================
33
34
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
9. Income Taxes, Continued:
------------
The sources of temporary differences which make up the deferred tax
balances are as follows:
March 31 2001 2000
------------------- ------------------
Deferred income tax assets:
Warranty accruals $ 301,500 $ 406,900
Vacation 62,400 80,300
Deferred interest and amortization of premium or
discount on debt 271,300 93,000
Allowance for doubtful accounts 42,600 40,600
Inventory 175,000 310,000
NOL carry forward 1,936,600 49,000
Other non-deductible accruals 134,200 375,000
------------------- ------------------
Total deferred tax assets 2,923,600 1,354,800
Deferred tax liabilities:
Depreciable property (2,026,900) (1,300,000)
Pension (15,200) (16,400)
Other (23,500) (22,500)
------------------- ------------------
Total deferred tax liabilities (2,065,600) (1,338,900)
------------------- ------------------
Net deferred tax asset 858,000
Deferred tax valuation allowance (858,000)
-------------------
Net deferred income taxes $ 0 $ 15,900
=================== ==================
At March 31, 2001, the Company had available net operating loss
carryforwards of approximately $5,696,000 for federal income tax
purposes, which are subject to limitations based on the Companies'
ability to generate future taxable income. These loss carryforwards
expire in years through 2021.
As there is not assurance of future income, a 100% valuation allowance in
2001 has been established against the Company's net deferred tax assets.
The Company will continue to evaluate the necessity for such valuation
allowance in the future.
34
35
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
9. Income Taxes, Continued:
------------
A reconciliation of the federal statutory income tax rate to the
effective rate follows:
2001 2000 1999
---------------------------- --------------------------- ----------------------------
Amount Percent Amount Percent Amount Percent
--------------- ----------- ------------- ------------ ------------- ------------
Statutory amount and rate $ (1,784,600) (34%) $ (278,895) (34.0)% $ 872,301 34.0%
Effect of:
State taxes (net of
utilization of tax loss (95,900) (1.8) (15,800) (1.9) 99,538 3.9
carryforwards)
Change in valuation allowance
858,000 16.3 0 0.0
Non-deductible expenses 21,500 .4 14,100 1.7 11,014 0.4
Other (3,352) 0.0 (4,234) (0.5) 49,397 1.9
--------------- ----------- ------------- ------------ ------------- ------------
$ (1,004,352) (19.1%) $ (284,829) (34.7)% $ 1,032,250 40.2%
=============== =========== ============= ============ ============= ============
10. Retirement Plans:
----------------
RVM has defined contribution plans covering salaried and non-union hourly
employees of the Company. The purpose of the plans is to provide
financial security during retirement by providing employees with an
incentive to make regular savings. Contributions of participating
employees are matched on the basis of the percentages specified in the
respective plans. The cost of such employer contributions was $133,071,
$181,557 and $94,669 for 2001, 2000 and 1999, respectively.
SABI participates in the GMP and Employers Pension Fund, a multi-employer
defined benefit pension plan, that covers all of its hourly bargaining
unit employees. Pension expense under this plan amounted to $20,280,
$18,733, and $20,002, in 2001, 2000 and 1999, respectively. These
contributions are determined in accordance with the provisions of a
negotiated labor contract and generally are based on the amount of wages
earned. Information as to SABI's portion of the accumulated plan
benefits, plan net assets and unfunded vested benefits, if any, is not
determinable.
Ravens has a defined benefit pension plan covering approximately 24
hourly employees at its service facility in Dover, Ohio. The plan
provides benefits of specified amounts for each year of service. Plan
assets at fair value exceeded the projected benefit obligation at March
31, 2001 and 2000, and prepaid pension cost recognized in the balance
sheet amounted to $65,925 and $43,491, respectively. Net pension (income)
cost for this plan was $(20,141), $10,186, and $11,751 for 2001, 2000,and
1999 respectively.
35
36
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
11. Lease Commitments:
-----------------
The Company leases certain of its office and manufacturing facilities as
well as machinery and equipment under various leasing arrangements. The
future minimum lease payments from continuing operations, by year and in
the aggregate, under noncancelable operating leases with initial or
remaining noncancelable lease terms in excess of one year, consisted of
the following at March 31, 2001:
Noncancelable
Operating Leases
----------------------
2002..................................... $ 452,672
2003..................................... 437,563
2004..................................... 355,163
2005..................................... 274,687
2006..................................... 186,614
Thereafter............................... 506,100
----------------------
Total minimum payments.............................. $2,212,799
======================
Rent expense was approximately $322,000, $317,000,and $219,000 in 2001,
2000, and 1999, respectively.
12. Related Party Transactions:
--------------------------
Albex is the obligor on a note payable to Jacob Pollock in the principal
amount of $2,900,000 (Albex Note). SABI is the obligor on a note payable
to J. Pollock & Company, and assigned to Jacob Pollock in the principal
amount of $1,131,000 (SABI Note).
The Notes require payment over a five-year term, with interest thereon,
at the rate of seven percent (7%) annum, accruing from and after April 1,
1997.
The Albex note payable balance due to Mr. Pollock was $2,465,000 at March
31, 2000 and Mr. Pollock advanced the company $303,508 during the year.
At March 31, 2001, the Albex note payable to Mr. Pollock was $2,768,508
and for interest owed but not paid was $441,998.
The SABI note payable to Mr. Pollock was $527,800 on both September 1,
2000 and March 31, 2001. Interest owed but not paid was $21,560 on March
31, 2001.
On October 1, 2000 the notes were amended to increase the principles for
additional amounts loaned to the Company and to forgive interest owed on
both notes through December 31, 2001. Total interest forgiven by Mr.
Pollock was $389,000. On March 31, 2001, the notes were amended to
reinstate interest previously forgiven of $389,000 and the expense was
recorded in the fourth quarter. The October 1, 2000 amendments to the
notes also included changes in interest and principle payment terms.
36
37
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
12. Related Party Transactions, Continued:
--------------------------
The Albex note requires interest only payments on the unpaid balance of
the Note beginning May 1, 1997 through December 1, 1997; interest and
principal payments from January 1, 1998 to September 31, 1998; interest
will be accrued but not paid and no principal payments will be made from
October 1, 1998 to March 31, 2002. Principal and interest owed at March
31, 2002 will be paid over the next 60 months with an interest rate of 7%
per annum.
All interest and principle payments on the SABI note as of September 1,
2000 to March 31, 2002 were suspended. Interest will be accrued but not
paid. Principal and interest owed at March 31, 2002 will be paid over the
next 60 months with an interest rate of 7% per annum.
On February 1, 2001 Albex entered into a Cognovit Demand Promissory Note
with Mr. Jacob Pollock. Interest will be accrued at a rate of 7% per
annum and interest and principle is payable on demand.
Payments with respect to these Notes are subordinated to the repayment of
substantially all other notes payable and long-term debt.
J. Pollock & Company, wholly owned by Jacob Pollock and was dissolved on
March 15, 2000; purchases materials and provides or contracts for certain
administrative services for the Company and charges the Company at its
cost. Such transactions totaled $0, $343,420, and $10,171 in 2001, 2000,
and 1999 respectively.
The Company leases office and manufacturing space from a corporation in
which Richard Pollock and Bruce Pollock are shareholders. The lease was
extended one year to December 31, 2001 at a monthly base rent of $9,300
with annual increases determined by the change in the Consumer Price
Index, plus the Company's share of utilities, real estate taxes,
insurance, and property maintenance. The Company paid approximately
$128,539 $129,000, and $139,000 in 2001, 2000, and 1999, respectively.
Richard Pollock and Bruce Pollock are sons of Jacob Pollock.
Since September 1, 2000, the Company has leased office space from 753 W.
Waterloo Rd. Limited Partnership, of which Jacob Pollock and his wife are
partners. The lease is for three years expiring August 31, 2003 at a
monthly base rent of $5,500 plus the Company's share of utilities, real
estate taxes, insurance, and property maintenance. The Company paid
$82,446, $83,882,and $85,805 in 2001, 2000, and 1999, respectively.
The Company purchased aluminum materials from The Aluminum Warehouse,
Inc., owned by Richard D. Pollock Living Trust U/A/D 8/2/94 and Richard
D. Pollock Irrevocable Trust U/A/D 1/4/94, totaling $103,076, $117,906,
and $91,560 in 2001, 2000,and 1999, respectively. The Company sold
aluminum extrusions to The Aluminum Warehouse, Inc. totaling $220,880,
$536,529 and $853,747 in 2001, 2000, and 1999, respectively. $20,836,
$147,826,and $157,121 was receivable at March 31, 2001, 2000, and 1999,
respectively.
37
38
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
12. Related Party Transactions, Continued:
--------------------------
The Company hired temporary personnel from Flex-Team Incorporated, wholly
owned by the Jacob Pollock Irrevocable Trust. Amounts paid by the Company
totaled $88,570, $378,090,and $516,485 in 2001, 2000, and 1999,
respectively. $75,607, $30,324,and $93,514 was owed at March 31, 2001,
2000, and 1999, respectively.
See Note 3 regarding acquisitions from and notes payable to related
parties.
Management believes that the terms of the above transactions are
comparable to those which would have been obtainable from unaffiliated
sources.
13. Stock Options:
-------------
RVM's 1993 Stock Option Plan (Plan) provides for the granting of options
to acquire up to 150,000 shares of the Company's common stock. The Plan
authorizes the granting of incentive stock options to employees of the
Company and nonqualified stock options to employees, officers and
directors, whether or not on the Company's payroll or otherwise paid for
services. The Plan provides that the option price shall not be less than
100% of the current market price of the stock on the date of the grant,
that the option is exercisable when granted, and that the term of the
option shall be fixed at the date of the grant and shall not exceed ten
years. The Plan terminates on July 7, 2003. At March 31, 2001, there were
107,979 shares available to be optioned under the Plan. The Company has
selected the disclosure-only option of Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123). In
accordance with SFAS 123, RVM accounts for its Stock Option Plan in
accordance with Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees (APB 25), and related Interpretations.
Under APB 25, because the exercise price of the Company's employee stock
options equals or exceeds the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
A summary of the Company's stock option activity and related information
for the years ended March 31 follows:
2001 2000 1999
----------------------------- ------------------------- ---------------------------
Weighted-Average Weighted-Average Weighted-Average
Exercise Exercise Exercise
Options Price Options Price Options Price
----------- ----------- ----------- ------------- ----------- -----------
Outstanding at beginning of year 32,021 $ 12.15 39,271 $ 10.65 39,521 $ 10.60
Granted 0 0
Exercised (500) 4.00 (250) 4.00
Forfeited or cancelled (12,405) 12.00 (6,750) 4.00 0
------ ----- ------
Outstanding and exercisable at
end of year
19,616 $ 12.24 32,021 $ 12.15 39,271 $ 10.65
====== ======= ====== ======= ====== =======
38
39
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
13. Stock Options, Continued:
-------------
The following table summarizes information about the Company's stock
options outstanding at March 31, 2001:
Weighted-Average Weighted-Average
Options Options Exercise Remaining Contractual
Grant Date Outstanding Exercisable Price Life(Years)
---------- ----------- ----------- -------------- ----------------------
1998 19,616 19,616 $12.24 2
14. Concentrations:
--------------
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of accounts receivable.
The Company performs ongoing credit evaluations of its customers and does
not usually require collateral. The Company maintains a reserve for
potential credit losses.
The principal raw material used by the Company is aluminum. The Company
purchases aluminum from several suppliers and believes that there are
ready supplies of aluminum available for its needs at acceptable prices.
A significant increase in the price or an interruption in the supply of
aluminum could have a material adverse effect on the Company's operating
results.
15. Fair Value of Financial Instruments:
-----------------------------------
The carrying amounts reported in the balance sheets for cash and cash
equivalents, accounts receivable, funds held by trustee for capital
expenditures, note payable, long term debt and accounts payable
approximate their fair market values.
16. Impairment of Machinery & Equipment:
-----------------------------------
During the fourth quarter of 2000, the Company reviewed its assets at
Albex and determined that certain assets would no longer be used in the
business. These assets consisted primarily of certain machinery and
equipment. Albex originally purchased specific equipment for use to
produce aluminum billet in the Cast House operation. The Company had
identified equipment with a net book value of approximately $3,217,000
that will not be required and was removed from service in the fourth
quarter of fiscal year 2000. The equipment had an estimated net
realizable value (sale of the assets less all cost associated with the
sale and removal of the assets) of approximately $644,000. The Company
recognized a $2,573,016 ($1,698,188 net of tax) impairment charge related
to the machinery and equipment. The equipment removed from service was
either unreliable and was more expensive to operate or added cost to the
manufacturing process. The Albex extrusion business was adversely
affected by the unreliable supply of billet from the Cast House. As a
result of an extensive review by management of the Cast House operation,
the Company installed new production equipment that reduced operating
cost and was more reliable than the equipment replaced. The new equipment
eliminated other manufacturing processes previously required and the
machinery used in those processes was retired. The equipment was
installed in the third quarter and started operations in the fourth
quarter of 2000.
39
40
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
16. Impairment of Machinery & Equipment, Continued:
-----------------------------------
During 2001, Assets Held for Sale of $553,001 were sold for $877,500,
which resulted in a gain on the sale of $324,499. Approximately $90,000
of equipment remains to be sold in 2002.
As planned in 2001, the gas furnaces in the cast house increased the
reliability of the volume output and reduced the operating cost. However,
a world wide surplus of aluminum billet eliminated the potential of
selling the excess aluminum billet capacity to outside customers. In
addition, Albex's lower extrusion sales also reduced the demand for
billet from the cast house. The cast house production was suspended in
November 2000.
17. Supplemental Cash Flow Information:
----------------------------------
(A) Cash payments for interest (net of amounts capitalized):
2001--$2,225,503; 2000--$1,900,221; and 1999--$1,844,181.
(B) Cash payments for income taxes: 2001--$217,296; 2000--$336,436 and
1999--$174,563.
40
41
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
MARCH 31, 2001
----------
18. Business Segments:
-----------------
Each of RVM's subsidiaries operates in one business segment. See Note 1
for a description of the segments. The Company's three reportable
business segments are managed separately based on fundamental differences
in their operations. Intersegment sales generally are priced at
prevailing market prices.
2001 RAVENS ALBEX SABI ELIMINATIONS CONSOLIDATION
- ------------------------------------------- ------------- ------------ ------------- -------------- --------------
Sales to customers ....................... $ 34,986,971 $ 17,425,597 $ 9,457,015 $ $ 61,869,583
Intersegment sales ....................... 3,744,981 (3,744,981) 0
------------ ------------ ------------ ------------ ------------
Net sales ........................... $ 34,986,971 $ 21,170,578 $ 9,457,015 $ (3,744,981) $ 61,869,583
============ ============ ============ ============ ============
Income (loss) from operations ............ $ (217,159) $ (2,362,054) $ (37,416) $ 39,427 $ (2,577,202)
Depreciation and amortization ............ 882,805 1,189,585 218,775 2,291,165
Capital expenditures ..................... 193,610 1,801,776 77,290 2,072,676
Assets ................................... 23,133,303 20,064,357 3,089,780 (2,584,837) 43,702,603
2000
- -------------------------------------------
Sales to customers ....................... $ 57,209,348 $ 24,785,266 $ 9,991,880 $ 0 $ 91,986,494
Intersegment sales ....................... 0 6,759,734 327 (6,760,061) 0
------------ ------------ ------------ ------------ ------------
Net sales ........................... $ 57,209,348 $ 31,545,000 $ 9,992,207 $ (6,760,061) $ 91,986,494
============ ============ ============ ============ ============
Income (loss) from operations ............ $ 4,775,309 $ (3,692,472) $ 219,342 $ 6,173 $ 1,308,254
Depreciation and amortization ............ 834,600 1,377,658 177,992 0 2,390,250
Capital expenditures ..................... 1,369,681 1,459,947 208,723 0 3,038,351
Assets ................................... 29,114,545 22,673,326 3,647,134 (1,703,297) 53,731,708
1999
- -------------------------------------------
Sales to customers ....................... $ 50,814,218 $ 21,068,053 $ 11,152,760 $ 0 $ 83,035,031
Intersegment sales ....................... 0 6,228,173 461 (6,228,634) 0
------------ ------------ ------------ ------------ ------------
Net sales ........................... $ 50,814,218 $ 27,296,226 $ 11,153,221 $ (6,228,634) $ 83,035,031
============ ============ ============ ============ ============
Income (loss) from operations ............ $ 4,667,478 $ (1,031,313) $ 577,180 $ 2,543 $ 4,215,888
Depreciation and amortization ............ 605,085 1,274,393 163,695 0 2,043,173
Capital expenditures ..................... 3,730,536 2,821,325 66,318 0 6,618,179
Assets ................................... 23,228,234 22,868,738 3,381,966 (479,048) 48,999,890
19. Subsequent Event (unaudited):
---------------------------
RVM has agreed in principle with FM, to extend the line of credit and
letter of credit until June 30, 2002. The long term debt with FM, the
terms of the notes were also changed in principle and all covenant
violations will be waived. The Company expects this agreement to be
finalized in July 2001.
41
42
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
for the years ended March 31, 2001, 2000 and 1999
Column A Column B Column C Column D Column E
- ------------------------------------- ------------- -------------------------------- ---------------- --------------
Additions
--------------------------------
Balance at Charged to Charged to Balance at
Beginning Cost and Other End of Period
Description of Period Expenses Accounts Deductions(A)
- ------------------------------------- ------------- -------------- -------------- ---------------- --------------
Allowance for doubtful accounts
Period ended:
March 31, 2001 $128,000 $109,826 $ 0 $112,627 $125,199
March 31, 2000 107,000 70,398 0 49,398 128,000
March 31, 1999 87,000 38,718 0 18,718 107,000
(A) Uncollectible accounts written off.
Balance at Charge to Balance at
Beginning of Accrual and Actual End of
Warranty Period Expense Expenses Period
- ------------------------------------- --------------- --------------- --------------- ---------------
Period ended:
March 31, 2001 $1,076,447 $ 427,650 $ 658,990 $ 845,107
March 31, 2000 850,000 1,032,534 806,087 1,076,447
March 31, 1999 775,000 1,054,850 979,850 850,000
42
43
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
--------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The directors and executive officers of the Registrant are listed
below:
Name Age Since Position
--------------------- --------- --------------------------- ------------------------------
Jacob Pollock 76 May 3, 1991 Chairman of the Board, Chief
(term expires in 2002) Executive Officer, and Treasurer
Nicholas T. George 56 May 3, 1991 Secretary and Director
(term expires in 2003)
Richard D. Pollock 45 May 3, 1991 President and Director
(term expires in 2001)
C. Stephen Clegg 50 May 3, 1991 Director
(term expires in 2001)
Louis N. Strike 54 September 9, 1998 Director
(term expires in 2003)
W. Patrick Warmington 47 October 1, 1999 President of Ravens, Inc.
James R. McCourt 52 June 28, 1999 Chief Financial Officer
All years in Item 10 refer to calendar years.
Mr. Jacob Pollock has been Chairman of the Board of Directors, Chief
Executive Officer, and Treasurer since May 3, 1991, the date he acquired
controlling interest in the Company. He has been Chairman of the Board and
President of J. Pollock & Company, a company principally engaged in the sale of
aluminum, private investment, and consulting, since April 1989. He was Chief
Executive Officer of Barmet Aluminum Corporation, an aluminum company, from
1949-1989. He serves as a Director of several nonpublic companies.
Mr. George, an Attorney, was President of the law firm of Nicholas T.
George & Associates from 1979 to 1997. He joined the law firm of Buckingham,
Doolittle & Burroughs, LLP as a partner in 1997 and was elected President on
February 1, 2000.
43
44
Mr. Richard Pollock has served as President of RVM since March 31, 1997,
President of Albex since May 1991 and as a Vice President of J. Pollock &
Company since February 1990. Prior to joining J. Pollock & Company, he was
employed as a Vice President and then President of Barmet Aluminum Corporation
for more than five years. Richard Pollock is the son of Jacob Pollock.
Mr. Clegg has served as Chairman of the Board of Directors and Chief
Executive Officer of Diamond Home Services, Inc. since February 1996. He has
served as Chairman of the Board of Directors of Mid-West Spring Manufacturing
Company, Inc. and Globe Building Materials, Inc. for more than five years, and
he is a Director of Birmingham Steel Corporation.
Mr. Strike has served as Managing Director and Partner of Ballenger,
Strike and Associates LLP, a management consulting firm, from January 1996 to
present; and as President, CEO and Chairman of Modern Fold, Inc. a leading
manufacturer of moving walls principally for hotels, schools, churches, and
commercial office buildings, from February 1998 to present. He previously served
as President of CINPAC, Inc., a food processing and packaging contractor, from
April 1992 to December 1995.
Mr. Warmington has served as President of Ravens since October 1, 1999,
and as Executive Vice President of RVM since August 1998. He was employed by
Kaiser Aluminum and Chemical from June 1990 to February 1998, as the Divisional
Vice President of the Distribution/OEM Extrusions Engineering Products Division
from November 1996 to February 1998 and as General Manager Canadian Operations
Extruded Product Division from October 1994 to November 1996.
Mr. McCourt has served as Vice President of Finance and Chief Financial
Officer of RVM Industries since June 28, 1999. He provided general and financial
management consulting from May 1998 to June 1999 to a variety of manufacturing
companies. He served as General Manager of the Enco Division of MSC Industrial
Supply, Inc. from December 1996 to May 1998 and as President of Allen Medical
Systems, Inc. from May 1991 to December 1996. He has another twenty years of
financial management experience and has a MBA and CPA.
Officers serve at the pleasure of the Board of Directors without specific
terms of office.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Based solely upon a review of copies of Forms 3, 4 and 5 furnished to RVM
during or with respect to the fiscal year ended March 31, 2001, RVM is not aware
of any person subject to Section 16 of the Securities Exchange Act of 1934 with
respect to RVM that failed to file on a timely basis reports required by Section
16(a) during the most recent fiscal year or prior fiscal years.
44
45
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The following table discloses compensation in excess of $100,000 awarded
to, earned by or paid to any executive officer:
Fiscal All Other
Name and Principal Position Year Salary Bonus Compensation (1)
------------------------------------- ----------------- ---------------- ----------------- ------------------
Jacob Pollock 2001 $125,000 $ 0 $ 0
Chief Executive Officer 2000 129,808 0 0
1999 125,000 0 0
Richard D. Pollock 2001 193,000 0 4,825
President 2000 203,776 0 5,011
1999 187,748 0 3,857
W. Patrick Warmington 2001 134,095 0 4,023
President, Ravens, Inc. 2000 128,071 10,400 3,853
James R. McCourt 2001 136,267 0 3,406
Chief Financial Officer
(1) Amount contributed to the named person's 401(k) plan account.
In 1993, RVM adopted a Stock Option Plan which provides for the granting
of options to acquire up to 50,000 shares of its common stock. The Plan
authorizes the granting of incentive stock options to employees of the Company
and nonqualified stock options to employees, officers and directors, whether or
not on the Company's payroll or otherwise paid for services. The Plan provides
that the option price shall not be less than 100% (110% in the case of a person
owning more than 10% of the Company's stock) of the current market price of the
stock on the date of the grant and that the term of the option shall be fixed at
the date of the grant. The Plan terminates on July 7, 2003.
Directors of RVM are paid $1,000 for Board of Directors meetings which
they attend. Additional compensation is not paid for committee meetings. In
1998, Mr. Clegg and Mr. George were each granted options to purchase 1,000
shares of common stock. The options have an exercise price of $12.00 per share
and expire on March 27, 2003.
The following table discloses information on options for the named
executive officers:
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
- -----------------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at March 31, 2001 (#) March 31, 2001 ($)
----------------------------- -----------------------------
Shares
Acquired on Value
Name Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
------------------------ -------------- --------------- -------------- --------------- -------------- --------------
Jacob Pollock 4,000 0 $0 $0
Richard D. Pollock 4,625 0 0 0
45
46
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
The Compensation Committee of RVM's Board of Directors consists of Jacob
Pollock, Chief Executive Officer, and C. Stephen Clegg. Mr. Pollock is a
Director and Mr. Clegg is Chairman of the Board of Directors of Mid-West Spring
Manufacturing Company, Inc. and Diamond Home Services, Inc., public companies,
and Globe Building Products, Inc., a nonpublic company. Mr. Pollock is a member
of the Compensation and Benefits Committee of the Board of Directors of Mid-West
Spring Manufacturing Company, Inc.
Report of Compensation Committee
- --------------------------------
The Committee has not formulated policies for compensation to Mr. Pollock
or other executive officers which relate compensation to corporate performance.
The compensation of each executive officer is determined by negotiation between
the executive officer and Mr. Pollock subject to the approval of the Committee
and the Board of Directors.
By: Jacob Pollock, Chairman
C. Stephen Clegg
Performance Graph
- -----------------
The following line graph shows a comparison of cumulative total returns,
assuming reinvestment of dividends, for a hypothetical investment of $100 made
on March 31, 1996, in the common stock of RVM, the S&P 500, and an index of peer
companies (peer group) selected by RVM. The peer group consists of the following
companies: Dorsey Trailers, Inc., Featherlite Mfg., Inc., Miller Industries,
Inc./TN, Wabash National Corp., Supreme Industries, Inc., Easco, Inc.,
International Aluminum Corporation, and Tredegar Industries, Inc.
RVM believes that the large returns in 1998 and 1997 are due to J.C.
Bradford & Co. making a market in RVM's common stock beginning in the first
quarter of 1997 and Herzeg Heine Geduld making a market beginning in the fourth
quarter of 1998. In addition, the Company retained investor relations
consultants in January 1998. Prior to May 1996, RVM's common stock did not
actively trade, but a market maker quoted bid prices and traded shares
infrequently. The decrease from 1998 to present may be attributed to lower
profits.
RVM S&P 500
Industries, Composite Index Peer
Inc. Group
---------------- ----------------- --------------
3/31/96 100.00 100.00 100.00
3/31/97 733.33 119.83 131.40
3/31/98 1,599.98 177.34 179.48
3/31/99 587.73 210.08 152.10
3/31/00 620.41 247.77 136.32
3/31/01 522.45 194.06 88.99
46
47
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The only owner of record or holder, to the knowledge of RVM as of June 1,
2001, of more than 5% of RVM's Common Stock is set forth in the following table:
Title of Name and Address of Amount and Nature of Percent of
Class Beneficial Owner Beneficial Ownership Class
- ------------------- ---------------------- ---------------------- ------------
Common Stock Jacob Pollock 1,682,156 (1)(2) 86.82%
753 W. Waterloo Road
Akron, Ohio 44314
Richard D. Pollock 120,270 (3)(2) 6.21
753 W. Waterloo Road
Akron, Ohio 44314
The following shows the ownership of RVM's Common Stock
beneficially owned directly or indirectly by each director, and by all
directors and officers of RVM as a group, as of June 1, 2000:
Title of Name and Address of Amount and Nature of Percent of
Class Beneficial Owner Beneficial Ownership Class
- ------------------- -------------------------- ---------------------- ------------
Common Stock Jacob Pollock 1,682,156 (1)(2) 86.82%
Nicholas T. George 57,940(3)(4) 2.99
C. Stephen Clegg 250(5) 0.01
Richard D. Pollock 120,270 (3)(2) 6.21
All directors and officers 1,764,191 91.05
as a group (6 persons)
(1) Jacob Pollock has sole voting and investment power with respect to
1,643,421 shares.
(2) 38,735 shares are held by the Pollock Family Foundation. Jacob
Pollock, Gertrude Pollock, Richard Pollock and Bruce Pollock, as
trustees, equally share voting and investment power with respect
to the shares.
(3) 57,690 shares are held in an irrevocable trust for the benefit of
Richard Pollock's children. Richard Pollock and Nicholas T.
George, as co-trustees, equally share voting and investment power
with respect to these shares. 19,230 shares listed for Richard
Pollock are owned by his spouse; Mr. Pollock disclaims beneficial
ownership of these shares. The remaining 4,615 shares are owned
directly by Mr. Pollock.
(4) Nicholas George has sole voting and investment power with respect
to 250 shares.
(5) C. Stephen Clegg has sole voting and investment power with respect
to 250 shares.
No preferred stock is currently outstanding.
47
48
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
J. Pollock & Company, wholly owned by Jacob Pollock was dissolved on
March 15, 2000; purchases materials and provides or contracts for certain
administrative services for the Company and charges the Company at its cost.
Such transactions totaled $0, $343,420, and $10,171 in 2001, 2000, and 1999,
respectively.
The Company leases office and manufacturing space from a corporation in
which Richard Pollock and Bruce Pollock are shareholders. The five year lease
was extended one year to December 31, 2001, at a monthly base rent of $9,300
with annual increases determined by the change in the Consumer Price Index, plus
the Company's share of utilities, real estate taxes, insurance, and property
maintenance. The Company paid approximately $128,539, $129,000,and $139,000 in
2001, 2000, and 1999, respectively. Richard Pollock and Bruce Pollock are sons
of Jacob Pollock.
Since September 1, 2000 the Company has leased office space from 753 W.
Waterloo Rd. Limited Partnership, of which Jacob Pollock and his wife are
members. The lease is for three years expiring August 31, 2003 at a monthly base
rent of $5,500 plus the Company's share of utilities, real estate taxes,
insurance and property maintenance. The Company paid $82,446, $83,882, and
$85,805 and in 2001, 2000, and 1999, respectively.
The Company purchased aluminum materials from The Aluminum Warehouse,
Inc., owned by Richard D. Pollock Living Trust U/A/D 8/2/94 and Richard D.
Pollock Irrevocable Trust U/A/D 1/4/94, totaling $103,076, $117,906, and $91,560
in 2001 2000, and 1999, respectively. The Company sold aluminum extrusions to
The Aluminum Warehouse, Inc. totaling $220,880, $536,529, and $853,747 in 2001,
2000, and 1999, respectively. $20,836, $147,826,and $157,121 was receivable at
March 31, 2001, 2000, and 1999 respectively.
The Company hired temporary personnel from Flex-Team Incorporated, wholly
owned by the Jacob Pollock Irrevocable Trust. Amounts paid by the Company
totaled $88,570, $378,090, and $516,485 in 2001, 2000, and 1999, respectively.
See Notes 3 and 12 to the consolidated financial statements regarding
acquisitions from and notes payable to related parties. See Notes 6 and 7 to the
consolidated financial statements regarding guarantees of certain debt of the
Company by related parties.
Management believes that the terms of the above transactions are
comparable to those which would have been obtainable from unaffiliated sources.
48
49
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report: Pages
---------
(1) Financial Statements:
Report of Independent Auditors 18
Consolidated Balance Sheets, March 31, 2001 and 2000 19-20
Consolidated Statements of Operations for the years ended
March 31, 2001, 2000 and 1999 21
Consolidated Statements of Changes in Shareholders' Equity
for the years ended March 31, 2001, 2000, and 1999 22
Consolidated Statements of Cash Flows for the years ended
March 31, 2001, 2000, and 1999 23
Notes to Consolidated Financial Statements 24-40
(2) Financial Statement Schedule:
II--Valuation and Qualifying Accounts
for the years ended March 31, 2001, 2000,and 1999 41
All other schedules are omitted because they are not
applicable or the required information is presented in the
financial statements or the notes thereto.
(3) Exhibits required by Item 601 of Regulation S-K:
Exhibit No. Item
----------- ----
2 (i) Agreement and Plan of Reorganization among Ravens
Metal Products, Inc., RVM Industries, Inc. and
Ravens, Inc. was filed as Exhibit 2 to Form 8-B filed
March 31, 1997, and is incorporated herein by
reference.
2 (ii) Stock Purchase Agreement for common stock of Albex
Aluminum, Inc. and Signs and Blanks, Inc. was filed
as Exhibit 2.1 to Form 8-K filed on March 31, 1997,
and is incorporated herein by reference.
2 (iii) March 30, 2000 Amendment to Stock Purchase Agreement
for common stock of Albex Aluminum, Inc. and Signs
and Blanks, Inc. listed as Exhibit 2(ii) above was
filed on June 19, 2000 as Exhibit 2(iii) to Form 10K
for the fiscal year ended March 31, 2000.
49
50
Exhibit No. Item
----------- ----
3 (i) Certificate of Incorporation of RVM was filed as
Exhibit 3.1 to Form 8-B filed March 31, 1997, and is
incorporated herein by reference.
3 (ii) RVM's By-laws were filed as Exhibit 3.2 to Form 8-B
filed March 31, 1997, and are incorporated herein by
reference.
10 (i) Management Agreement dated April 1, 1994, between J.
Pollock & Company and Registrant was filed as Exhibit
10(vii) to Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994, and is incorporated
herein by reference.
10 (ii) Loan Agreement dated as of December 1, 1994, between
the registrant and City of Kent, Ohio was filed as
Exhibit 10(a) on Form 8-K dated December 12, 1994,
and is incorporated herein by reference.
10 (iii) Promissory Note dated December 13, 1994, from the
registrant to the City of Kent, Ohio was filed as
Exhibit 10(b) on Form 8-K dated December 12, 1994,
and is incorporated herein by reference.
10 (iv) Reimbursement Agreement dated June 26, 1995, between
the registrant and FirstMerit Bank, N.A. (fka First
National Bank of Ohio) was filed as Exhibit 10(v) to
Registrant's Annual Report on Form 10-K for the
fiscal year ended March 31, 1995, and is incorporated
herein by reference.
10 (v) Guaranty Agreement dated as of July 1, 1995, and
executed by the registrant on August 14, 1995, among
Albex Aluminum, Inc., J. Pollock & Company, Ravens
Metal Products, Inc., Signs And Blanks, Inc., Jacob
Pollock, Gertrude Pollock, Richard D. Pollock, The
Provident Bank, as trustee, and The Director of
Development of the State of Ohio was filed as Exhibit
99(b) on Form 8-K dated August 21, 1995, and is
incorporated herein by reference.
10 (vi) Loan Agreement and Promissory Note dated September
30, 1997, between the registrant and FirstMerit Bank,
N.A. was filed as Exhibit 10(i) on Form 10-Q for the
quarter ended September 30, 1997, and is incorporated
herein by reference.
10 (vii) Business Loan Agreement and Promissory Note dated
September 30, 1997, between the registrant and
FirstMerit Bank, N.A. was filed as Exhibit 10(ii) on
Form 10-Q for the quarter ended September 30, 1997,
and is incorporated herein by reference.
10 (viii) Commercial Guaranty dated September 30, 1997, between
Jacob Pollock and FirstMerit Bank, N.A. was filed as
Exhibit 10(iii) on Form 10-Q for the quarter ended
September 30, 1997, and is incorporated herein by
reference.
50
51
Exhibit No. Item
----------- ----
10 (ix) Promissory Note (as amended and restated October 1,
1998) between Albex Aluminum, Inc. & Jacob Pollock
was filed as Exhibit 10(i) on Form 10-Q for the
quarter ended December 31, 1998, and is incorporated
herein by reference.
10 (x) Promissory Note (as amended and restated March 31,
1997) between Signs and Blanks, Inc. & J. Pollock &
Company was filed as Exhibit 10(ii) on form 10-Q for
the quarter ended December 31, 1998, and is
incorporated herein by reference.
10 (xi) Loan Agreement and Promissory Note dated September
30, 1998, between the Registrant and FirstMerit Bank,
N.A.
10 (xii) Promissory Note between RVM Industries, Inc. and
FirstMerit Bank, N.A. dated April 1, 1999 was filed
as Exhibit 10(i) on Form 10Q for quarter ended June
30, 1999, and is incorporated herein by reference.
10 (xiii) Promissory Note between RVM Industries, Inc. and
FirstMerit Bank, N.A. dated September 30, 1999 was
filed as Exhibit 10(ii) on Form 10Q for quarter ended
September 30, 1999 and is incorporated herein by
reference.
10 (xiv) Amendment to Loan Agreement dated September 30, 1999
between RVM Industries, Inc. and FirstMerit Bank,
N.A. for the Loan Agreement dated September 30, 1997
was filed as Exhibit 10(ii) on Form 10Q for quarter
ended September 30, 1999, and is incorporated herein
by reference.
10 (xv) Amendment to Business Loan Agreement dated September
30, 1999 between RVM Industries, Inc. and FirstMerit
Bank, N.A. for the Business Loan Agreement dated
September 30, 1997 was filed as Exhibit 10(ii) on
Form 10Q for quarter ended September 30, 1999, and is
incorporated herein by reference.
10 (xvi) Promissory Note between Albex Aluminum and Jacob
Pollock, trustee as of March 31, 2000.
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
Executive Compensation Plans and Arrangements
---------------------------------------------
The Registrant's executive compensation plans and arrangements required
to be filed as exhibits are listed under Exhibit 10 above.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended March 31,
2001.
51
52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date July 12, 2001 RVM INDUSTRIES, INC.
----------------------
By: /S/ Jacob Pollock
-----------------------------------
Jacob Pollock, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
Date July 12, 2001 /S/ Jacob Pollock
-------------------- -----------------------------------
Jacob Pollock, Director and
Chief Executive Officer
Date July 12, 2001 /S/ Nicholas T. George
-------------------- -----------------------------------
Nicholas T. George, Director
Date July 12, 2001 /S/ C. Stephen Clegg
-------------------- -----------------------------------
C. Stephen Clegg, Director
Date July 12, 2001 /S/ Richard D. Pollock
-------------------- -----------------------------------
Richard D. Pollock, Director
Date July 12, 2001 /S/ Louis N. Strike
-------------------- -----------------------------------
Louis N. Strike, Director
Date July 12, 2001 /S/ James R. McCourt
-------------------- -----------------------------------
James R. McCourt, Chief Financial
Officer and Principal Accounting Officer
52